Here’s a quick way to calculate much you should charge for your hourly consulting rates. Whether you provide consulting services or add value to your product line by individualized consulting, you should price your services based on your value. Use this process to set your consultant hourly rate.
Most Businesses Can Offer a Consulting Rates
Professional services companies, such as accountants, lawyers, human resources, IT services, and others often provide their services at an hourly consulting rate. But even product companies can add to their revenue stream by offering consulting.
For example, a retail store own can update their boutique business plan with a consultant hourly rate to offer personalized fashion advice. A software reseller can provide customized solutions to recommend the right products for a particular purpose. A reseller of sauna equipment can add consulting rates to create custom layouts based on room configuration. A furniture reseller can offer interior design services.
By listing a consultant hourly rate as a product line item, you can generate a new source of revenue.
Setting Your Consultant Hourly Rate
Here’s how to calculate a ballpark hourly consulting rates:
- 2000 average available work hours per year
- $100,000 target annual salary
- $25,000 expenses (don’t forget medical, dental, etc), presuming you work from home and have no office rent expenses
- $125,000/2000 = $62.50/hour if you work from home and have no rent
- BUT – you probably won’t be billing all 2000 hours
- Presuming you are able to bill at least half time, the numbers go to: $125,000/1000 = $125/hour
You can tweak the calculations based on your specific situation. For example, if you rent an office or workspace, include that in your expenses. Also, add in the cost of software, website hosting, and other services you will need to run your business.
Take a hard look at your gross margin to see how you can minimize your expenses to maximize your profits.
Other Factors that Influence Your Consulting Rates
If you’re really good at what you do, don’t short change yourself by pricing yourself too low just to get business. There is a brand perception for higher priced services. Word can spread about your low consultant hourly rates. This can pose a challenge as you try to get higher-paying clients.
Look at it like this: there is a reason that Mercedes-Benz and other luxury car companies price their vehicles much higher. They might have a few extra features, but a major factor in people buying their cars vs. cheaper ones is brand value.
You can probably bill higher consulting rates if there is a strong brand perception related to working with you. You can make this happen by writing lots of educational content to put on your website, speaking at events, writing books (CreateSpace by Amazon is a wonderful self-publishing service).